Archives for February 2014

AUD sells off during Asian session and reverses its losses during the UK session.

This is one of my favourite trade setups.  When the Asian session moves the AUD one way, the UK traders will very frequently reverse the move.  The European traders (starting an hour before the UK traders) ran the stops of the Asian traders creating the low of the day.  The London traders seeing the pair has run its range reverse the move and start running stops on the European traders.

By following the UK traders once price indicates their intention, (not guessing) with an affordable stop loss, the question is how profitable will the trade be before the US news which is in 2 rounds today?  We tighten our stop loss in advance of the news – US Employment numbers are always scrutinized and the market tends to be very reactive to surprises.

Although we use our Target 2 for the R:R ratio, in trading this pattern we are hoping to get to the Asian session high – not necessarily to our T1 and T2.  There’s an old Wall Street adage -“pigs get fat but hogs get slaughtered”.  If the candles indicate there is momentum above the Asian high – wonderful – lock in more profit…but it doesn’t usually with this pattern, so don’t be greedy – read price!

Good luck with your trading!

Back tomorrow if we find a trade.  By the way, I have a former student who did a lot better than me yesterday by shorting the EUR after the triple top…while I was focused on the GBP short.

The GBP is making the largest range of the majors lately, and the USD gained strength in the session.  Once the UK economic news was out of the way, it was clear that the GBP lacked any upside momentum.  As it began to fade, we find an entry short.  We patiently wait for price to close below the Asian session level – approximately 16 pips away.  Once it does, we tighten our profit stop while giving a bit of room for a retest of the Asian low.  With US news approaching, we tighten our take profit again to lock in modest gains.  The news candle bounces off yesterday’s low, so we tighten down our profit stop a bit more.  As price bounces off our Target 1 we exit and move on.

A bit of politics to be played out in the UK with next month’s budget.  Traders are looking to see if pre-election tax cuts will be announced to offset a possible interest rate increase to signal a potential end to a period of emergency monetary policy.

Good luck with your trading!

Back tomorrow if we find a trade.

JPY sells off during the Asian session and reverses upward during the UK and US session..

The UK traders lured in breakout shorts and reversed the market.  Once the news was behind us, we waited for an entry to set up and find one at yesterday’s low.   The Reward to Risk ratio is greater than 3:1 to our Target 2. Price climbs in the first hour, retraces slightly and moves sideways in advance of the US session and pending economic news. We move our stop loss up below structure – the trade is stress free.

After the US Employment and Core CPI numbers are released, the pair begins to climb again and we keep moving our profit stop up.  As wicky candles with large upper wicks print… forecasting a potential reversal, we tighten our profit stop and the market takes us out of the trade.  Subsequently the pattern is completed without us.

The market is getting active again and familiar patterns and setups are becoming clearer and easier to trade.  January was the slowest month that I have seen in years.

Good luck with your trading!

Back tomorrow if we find a trade.

The GBP sold off hard after the UK economic news releases.   After a brief foray beneath yesterday’s low, the pair started to strengthen in advance of the US news.  The pair had difficulty getting through the Asian session lows, but the buyers were clearly in control as many institutional traders would seize the opportunity to add to their positions after the pullback.

We enter long and as price slips back narrowly missing our Target 1, we exit just below the Asian high.  A familiar pattern is completed and we move on.

Good luck with your trading!

Back tomorrow if we find a trade.

The CHF set up beautifully just before the US Open.

After stair-stepping down during the first half of the UK session, sellers enter as price approaches the Asian low.  The US traders push it down to yesterday’s low.  A very affordable stop of 10 pips is placed with a classic setup.  The trade quickly runs to our Target 2 and we exit on the next candle as price rebounds toward our Target 2.   Modest gains but a classic setup to begin our trading week.

Good luck with your trading!

Back tomorrow if we find a trade.

USD shook off disappointing Retail Sales & Employment numbers to strengthen against the JPY.

An entry long is taken and we immediately run into sellers at the Asian low.  Removing the risk from the trade, we move the stop to plus 1.  Retracement trades are trickier than trending trades.  Price continues upward before stalling at yesterday’s low where it begins to dip as the session ends.

Good luck with your trading!

Back tomorrow if we find a trade.